It has been estimated that more than 1.7 million self-employed workers now earn below the new National Living Wage.
According to the Social Market Foundation’s (SMF) research this number will eventually rise to 1.9 million by 2020, affecting the 14 per cent of the UK workforce who are self-employed.
The SMF’s annual Family Resources Survey (FRS) also found that 49 per cent of the UK’s self-employed workforce were low paid on an hourly basis – defined as earning two-thirds or less than employees – compared with 22 per cent of employed people.
It found the problem was particularly noticeable in London, where 18 per cent of workers are self-employed.
This month the National Living Wage came into force meaning anyone over the age of 25 has seen their wage increase to £7.20 per hour; a move the government has said will help more than one million low paid workers.
The SMF said its research – funded by the charity Trust for London – also raised concerns that the introduction of the higher National Living Wage provided an “added incentive” for firms to contract out services to self-employed people rather than take them on directly.
“Policies such as the National Living Wage make it artificially more attractive for firms to engage contractors rather than employees, and ignore a large section of low paid workers,” said SMF chief economist Nida Broughton.
A spokesperson for the Department for Business, Innovation and Skills, said: “This government is committed to backing enterprising self-employed people through initiatives like start up loans, tax allowances and by cutting red tape by a further £10 billion.
“Our new National Living Wage will give a boost to over one million low paid workers when it takes effect.”
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Link: SMF Report